13a. THE FUTURE OF U.S. AGRICULTURAL POLICY (

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13a. THE FUTURE OF U.S. AGRICULTURAL POLICY
( How Public Policy Really Works)

• Larry D. Sanders
• Fall 2005

Dept. of Ag Economics Oklahoma State
University
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The Future of U.S. Agriculture Factors
Constraints
Rural Development
Commodity
SUPPLY
Monetary
--Production
Energy
Res. Dev.
Technology
--Processing
--Distribution
Environment
Fiscal
--Domestic
INPUTS
--Import
OUTPUTS
--Natural
--Technology
--Stability
--Capital
--Economic Growth
--Human
DEMAND
--Environment
--Social
--Tastes/Pref.
--Income
Land
Trade
Consumer
--Employment
--Population
Transportation
Foreign
--Domestic
Immigration
Education
--Export
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2002-2007 Changes in 2002 FSRIA?

• Some tinkering certain
• Some cost-savings attempted
• Debate for the next farm bill begins NOW
  (04/05)
• Rewrite of FSRIA02 begins in 05
• Budget Reconciliation
• Appropriations
• New enabling legislation in 07-08.
• WTO could impact
• Wildcards
• New Cabinet new Congress
• War on terrorism could impact
• War with Iraq, Afghanistan, others could impact

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Evolution of Farm Bill Programs

• Respond to market changes?
• Still bulk market focused
• Concerns of trade partners
• Domestic Trade supports likely to be cut
• Concerns of producers, agribusiness rural
  communities
• Likely little change
• Local markets and backlash against free trade
  could cause reconsideration
• Budget concerns
• Likely to see cuts in domestic supports
• Shift to green payments not likely in near term
• Reconsider the use of need for food surplus
• Food security
• Hunger malnutrition

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Factors to Consider for the Coming Policy Debates

• Twin deficits
• Budget
• Trade
• Solid farm financial performance
• Turf battles among
• Interest groups
• Ag Committees Budget
• Ag Committees Appropriations

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Other Policy Actions

• Overall budget management
• Tax Reform
• Energy Policy
• Trade agreements
• Other

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Social Contract with Agriculture 2007 Beyond?

• Not the end of farm support payments, unless
  Congress so acts
• Congress must either pass new legislation or
  policy automatically reverts to 1938 1949 acts

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Social Contract with Agriculture2007 Beyond?
(continued)

• Factors shaping social contract w/agriculture
• Federal Budget--growing deficit reduces
  flexibility
• Trade Balancegrowing deficit
• Commodity input prices--unstable prices will
  vary producer rent-seeking from government
• Food prices--stable/low prices reduces consumer
  interest in supporting farmers
• Global competition--mixed
• Environmental/food safety concerns--mixed
• Political philosophydesire for less government
  regulation but more govt funding may challenge
  support for farmers
• Structural technological changemixed
• Wildcards???

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Social Contract with Agriculture 2007 Beyond?
(continued)--What are the alternatives?

• 1. End farm programs
• 2. Renew phasedown to free market
• 3. Convert to Green Payments (composite of CRP,
  EQIP, WHIP, WRP, CSP, etc.)
• 4. Subsidized Insurance (crop yield, revenue,
  income, etc.)
• 5. Target small farms
• 6. Revert to 1938 1949 acts

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Social Contract with Agriculture 2007 Beyond?
(continued)

• Choice will depend on the evolution of the social
  contract whose interests are considered in
  Washington
• Taxpayers?
• Consumers?
• Producers?
• Agribusiness?
• Trading partners?
• Others?

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Public Policy is . . .

• Public policy and sausage have a lot in common.
  You may like the results of both, but you
  wouldnt want to see how theyre made.
• --Governor Henry Bellmon, paraphrasing
• Germanys Bismark in the 19th century